Best Market Segment Report: US Occupied Insurance Moves Between Troubled and Expensive

OLDWICK, NJ–(BUSINESS WIRE)– The captive insurance market segment in the US continued to generate profits and surpluses in 2021 as they outperformed their market peers, according to new data. AM Best report.

The Best Special Report, “U.S. Captive Insurance: Moving Amid Crisis and Pricing Challenges,” says the best-read U.S. captive insurance company reported another strong year, with premiums of $1.0 billion, down slightly from $ 1.1 billion reported in 2021. The five-year cumulative average of 84.5 posted by AM’s best-rated U.S. customers exceeded the 99.4 of their commercial counterparts. Year by year, these US slaves recorded a 1.8 percent change in their combined ratio to 85.4 in 2021. Overall, between 2017 and 2021, they added $4.3 billion to their year-end balance while returning $5.8 billion in stockholder and policyholder dividends, which represents $10.1 billion in insurance premiums that the captives saved for their organizations by not purchasing funds from third parties in the stock market.

“The inherent flexibility of the captive sector in risk management allows for profitability and sustainability while generating value for policyholders and stakeholders, regardless of market conditions,” said Dan Teclaw, managing partner, AM Best.

Reimbursement remains a challenge for US rated insurers. In 2021, the total return on investment increased slightly, which when combined with the capital gains, the gross income returns to 4.1% from 3.9%.

Capital expenditures still contribute significantly to operating profit despite weak returns from growing companies.

According to the report, the number of US captives continues to rise, although the growth of captives has stalled due to economic uncertainty caused by the pandemic, as well as ongoing audits from the IRS and regulatory and reporting requirements. However, this led insurers to explore alternative and flexible options that captives could offer.

“The difficulty of the stock market highlights the benefits of the captive sector and gives businesses the incentive to set up,” said Fred Eslami, managing director, AM Best. “In difficult markets, some non-insurance companies may think that the commercial market does not understand or raise the value of their views on their risks, so they seek to make slaves. This place allows the captives to hide risks that may be unusual or difficult to write or put in the normal market. ”

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